Gold - Easing Back To Key Level Of $1300

by: Dean Popplewell

By Stuart McPhee

Gold for Wednesday, July 23, 2014

The $1300 level has been reinforced as a level of significance in the last week with gold falling sharply from its highs above $1345 back down to this level where it has been met with overwhelming demand. This has seen gold rally higher and now consolidate just above the $1310 level. During the second half of June, gold steadily moved higher but showed numerous incidents of indecision with its multiple doji candlestick patterns on the daily chart. This happened around $1320 and $1330. Several weeks ago now gold enjoyed a stunning surge higher to break through some key levels along its way to reaching a then two month high just above $1320 and immediately after it eased away ever so slightly and consolidated with its flow of doji patterns. It was then able to slowly move higher to a four month high above $1345. It was also able to break through the $1300 level which has recently played a role again. If sellers do take advantage of these relatively higher prices which will most likely bring the $1300 level back into play. The OANDA long position ratio has dropped to its lowest level in a few months around 51% showing a much more bearish sentiment than the long term average.

At the beginning of June, gold did very well to repair some damage and return to the key $1275 level, then it has continued the momentum pushing a higher to its recent four month high. After moving so little for an extended period, gold dropped sharply several weeks ago from above the well established support level at $1275 as it completely shattered this level falling to a four month low around $1240. It remained around support at $1240 for several days before its recent rally higher. Prior to the strong fall a few weeks ago gold had remain fixated on the $1293 level and had done very little as volatility has dried up completely resulting in gold moving very little. It pushed down towards $1280 before sling shotting back and also had an excursion above $1300 for a short period before moving quickly back to the $1293 area again. Over the last few weeks gold has eased back from around $1315 to establish its recent narrow trading range below $1295 before its recent slump.

Over the last few months the $1275 level has established itself as a level of support and on several occasions has propped up the price of gold after reasonable falls. Throughout the second half of March gold fell heavily from resistance around $1400 back down to a several week low near support at $1275. Both these levels remain relevant as $1275 continues to offer support and the $1400 level is likely to play a role again should gold move up higher. Through the first couple of months of this year, gold moved very well from a longer term support level around $1200 up towards a six month higher near $1400 before returning to its present trading levels closer to $1300.

Gold settled lower on Tuesday as tensions eased in the Crimean region after pro-Russian rebels in Ukraine handed the flight recorder and victims' remains from a downed Malaysia Airlines jet to international authorities. The dollar rose along with equities, weighing on bullion and other safe-haven assets such as U.S. long-term bonds, after U.S. data pointed to light build in inflation. The most-active U.S. gold futures for August delivery ended $7.60 lower at $1,306.30 an ounce. Spot gold, meanwhile, was last down 0.4 percent at $1,308.10 an ounce. Gold jumped almost 1.4 percent last Thursday - its most in a month - as investors sought the metal as a hedge against losses in the dollar and equities after Malaysia Airlines Flight 17 was brought down in an Ukraine rebel zone.

(Daily chart / 4 hourly chart below)

Gold July 22 at 01:50 GMT 1311.9 H: 1313.3 L: 1310.9

Gold Technical

S3 S2 S1 R1 R2 R3
1300 1240 - 1330 - -

During the early hours of the Asian trading session on Tuesday, Gold is easing lower just above $1310 after surging higher back above $1325 last week. Current range: trading right around $1311.

Further levels in both directions:

• Below: 1300 and 1240.

• Above: 1330.

OANDA's Open Position Ratios

(Shows the ratio of long vs. short positions held for Gold among all OANDA clients. The left percentage (blue) shows long positions; the right percentage (orange) shows short positions.)

The long position ratio for Gold has surged up to above 60% again as it has eased back from its highs around $1330. The trader sentiment is strongly in favour of long positions.

Economic Releases

  • 01:00 AU Internet Skilled Vacancies (Jun)
  • 01:30 AU CPI (Q2)
  • 08:30 UK BBA Mortgage Approvals (Jun)
  • 10:00 UK CBI Distributive Trades (Jul)
  • 12:30 CA Retail Sales (May)
  • 14:00 EU Flash Consumer Sentiment (Jul)
  • UK BoE MPC minutes released

*All release times are GMT